Midwest shredded scrap prices suffered another poor month as
excess supply drove prices down further to make it the weakest
grade in August.
Market participants in
Illinois, Indiana, Michigan and Missouri said reported deals
for shred were down between $10 and $20 per gross ton from July
levels, with prices weakest in the Detroit area.
With the exception of
Detroit, the overall Midwest region traded shred at $10 to $15
lower per ton on average, while prime scrap such as No. 1
busheling traded sideways. Weaker shred prices sent the
differential between busheling and shred to historical levels
of around $40 per ton, and some markets even sent it below the
price of 5-foot plate and structural scrap, sources said.
Chicago-area mills set
the tone as they entered the August market first to trade
sideways on obsolete and prime grades and down about $10 per
ton on shred from July levels.
While mills served by
the St. Louis area mostly followed suit, Detroit-area mills
were able to negotiate some additional price drops on most
grades and Indiana mills reportedly traded between the trends
of Chicago and Detroit.
As a result,
Midwest Ferrous Scrap Index for No. 1 busheling settled
Aug. 12 at $409.95 per gross ton, down 79 cents from July 10,
while the Midwest Ferrous Scrap Index for shred settled at
$368.85 per ton, down 3.2 percent from $381.06 in the same
comparison, creating a $41.10 differential. Only a few months
ago, the two grades traded on par with each other, but the
widening gap came as no surprise to market participants.
"When July purchases
were completed, the mills claimed there was a fair amount of
unsold shred still available. And it was pretty universal
geographically. With the better July prices, the inflow of
shred feed increased. The net result as perceived by mill
purchasing agents was a very abundant supply of shred sitting
in the hands of ready sellers," one source said. "When they
entered the market at down $10 to $15 for shred, there was very
Despite falling shred
prices, other obsolete grades such as No. 1 heavy melt and
plate and structural held their own because of tighter supply,
due partly to shredders consuming those grades as raw
In many Midwest
markets plate and structural, which typically sells below the
value of shred, reportedly traded on par or up to $5 per ton
over the price of shred at prices mostly unchanged from July.
No. 1 heavy melt prices, meanwhile, slipped slightly as some
mills used the sideways market to narrow price ranges. As a
result, AMMs Midwest Ferrous Scrap Index for No.
1 heavy melt settled Aug. 12 at $354.18 per ton, down $1.89
from a month earlier.
"The current pricing
dynamic is strictly supply-demand related. There are more tons
of shred available compared to demand. P&S (plate and
structural) is a little tighter in overall supply so it is
commanding a slightly higher price. I would imagine that it
will change as more parties adjust their melt mixes to
substitute lower-cost materials and the supply tightens up as a
result," one mill buyer said.